Based in Overland Park, Kan., the company derives about 80% of its annual revenue from the sale of salt, much of it used by municipalities to de-ice roads in winter. Following the warmest winter in two decades, however, many cities and towns are sitting on large inventories of rock salt. Adding to the pain, a tornado damaged a Compass salt mine and evaporation facility in Canada in August 2011, while a rainier-than-normal summer last year meant less evaporation at a plant that produces sulfate of potash. The fertilizer, which accounts for the other 20% of sales, is harvested by evaporating water from the Great Salt Lake.

To be sure, the weather has taken a toll on Compass' results. This year, the company is expected to earn $109.9 million, or $3.43 a share, on revenue of $1 billion, down from last year's already depressed earnings of $160.4 million, or $4.79, on revenue of $1.1 billion.

Yet Compass (ticker: CMP) has stayed profitable and maintained a healthy balance sheet, with only $336.5 million of net debt. Moreover, it generates enough cash to pay an annual dividend of $1.98 a share, for a yield of 2.7%. Perhaps best of all, depending on your view, weather forecasters say the coming winter could be wet, nasty, and long.

Compass Minerals International

Recent Price

$72.81

52-Week Range

$62.85 - $81.36

Market Value (bil)

$2.4

EPS 2012E

$3.43

EPS 2013E

$5.15

P/E 2013E

14.1

Dividend Yield

2.7%

Net Debt (mil)

$336.5

E=Estimate. Source: Thomson Reuters

Assuming they're right, Wall Street expects Compass to earn $5.15 a share next year. That growth could command a price/earnings multiple of 17 times 2013 estimated earnings, up from 14 times earnings now, says Matthew Wiens, chief equity analyst at Sandhill Investment Management. Compass historically has produced relatively steady earnings gains, suggesting that it deserves an above-market P/E. It typically has enjoyed 1% to 2% annual growth in demand and 3% to 4% price increases. At 17.5 times earnings, the stock would be worth about $90 a share, or 25% more than its recent price of $72.81.

Compass benefits whenever municipalities spread rock salt, usually after an inch of snow has fallen. The company tracks snow "events," although it is agnostic about their severity. A 20-inch snowstorm is nothing but 19 inches of wasted precipitation, jokes Brisimitzakis, 54. Last winter, there were 89 snow events in Compass territories, which encompass the U.S. Midwest and Canada, down from 203 in the prior winter and almost half the average of the past 10 years.

Predicting the weather seems as much art as science these days. But about 90% of the time, an exceedingly warm winter with well-below-normal snowfall is followed by a winter with 10% to 25% more snow than the average, says Bill Kirk, CEO of forecasting firm Weather Trends International. Kirk expects the coming winter to last longer than usual, too, with March potentially being one of the snowiest in years.

COMPASS BOASTS AN ASSET BASE and business that are almost impossible to replicate. The company owns the world's largest rock-salt mine, in Goderich, Ontario, on Lake Huron, from which salt can be shipped inexpensively on barges. Keeping transportation costs low is key because they account for 30% of the selling price. Compass also benefits from having its largest salt mine located near the North American snow belt, in the North Central states.

Sales are likely to stay soft through the end of the year, as customers work off inventories and prices fall. Likewise, costs could be higher than normal because the mines won't be operating at full capacity and the company has had to repair damage caused by the tornado. At least Compass has a flexible work force that can be dismissed when times are tough and recalled when business improves. In the second quarter, sales in the salt segment fell 6%, to $119.9 million, and operating income fell 5%, to $12.9 million.

The Bottom Line

Compass shares have oscillated between $68 and $78 this year. If the company earns more than $5 a share in 2013, as expected, the stock could trade up to $90. It yields 2.7%.

Compass produces fertilizer used on high-end crops, including fruits, vegetables, and nut trees. Its fertilizer customers, typically on the West Coast and in the Southeast, haven't been harmed by the drought in the Midwest. Sales and prices of sulfate of potash have been strong, pushing that segment's revenue up 14% in the second quarter, to $56.2 million. But because of last year's cloudy weather, the cost of producing SOP rose and profit margins were compressed. Second-quarter operating income in the segment fell 26%, to $13.9 million, from the prior year's total.

Evaporation has improved greatly this year, owing to ample sun and hot temperatures at the Great Salt Lake. The company hopes that population growth and rising demand for healthy foods will bolster demand for SOP.

So, if Mother Nature is reading this, Compass—and its patient shareholders—deserve a break.